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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4983
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I have about £43000. in a pension I want to cash in (had the

Resolved Question:

I have about £43000. in a pension I want to cash in (had the 25 percent already) I leave work at the end of February & do not get my state pension until June I have no other income. How can I avoid paying too much tax?
Submitted: 1 year ago.
Category: Tax
Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your question..

Please advise -

What are you likely to earning in this tax year before you leave your job in FEb 2017?

How urgent is your need for these funds?

Many thanks

Customer: replied 1 year ago.
We are using the funds to set up in Spain. Need at least half of my pension pot by the end of March 2017. I earn about £25000.per annum before tax.
Customer: replied 1 year ago.
is there any more information you need?
Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your reply and for additional information.

You say you earn about £25k per annum and that you would be leaving your job in Feb 2017. That would make your earnings around £23k.

You need at least 50% of your pension pot making it around £22k.

Based on above, your total income would be (23,000+22,000) = £45,000 before tax and personal allowance and (45,000-11,000) £34,000 after personal allowance.

The first £32,000 would attract tax at standard rate of 20% and £2,000 would attract tax at 40% (tax of £800 instead of £400).

If you wish to mitigate this additional tax then you either take 45% of the pension pot before end of tax year or consider a small pension plan of upto £3,600pa for future use.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Please only rate my answer if it is acceptable.

taxadvisor.uk and 3 other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 1 year ago.

I thank you for accepting my answer.

I hope the phone call was helpful.

Best wishes

Customer: replied 1 year ago.
thank you very much.
Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your good words.